Reboot, Inc. is a manufacturer of hiking boots. Demand for boots is highly seasonal. In particular, the demand in the next year is expected to be 3,000, 4,000, 8,000, and 7,000 pairs of boots in quarters 1, 2, 3, and 4, respectively. With its current production facility, the company can produce at most 6,000 pairs of boots in any quarter. Reboot would like to meet all the expected demand, so it will need to carry inventory to meet demand in the later quarters. Each pair of boots sold generates a profit of $20 per pair. Each pair of boots in inventory at the end of a quarter incurs $8 in storage and capital recovery costs. Reboot has 1,000 pairs of boots in inventory at the start of quarter 1. Reboot’s top management has given you the assignment of doing some spreadsheet modeling to analyze what the production schedule should be for the next four quarters and make a recommendation.
(a) Visualize where you want to finish. What numbers will top management need? What are the decisions that need to be made? What should the objective be?
(b) Suppose that Reboot were to produce 5,000 pairs of boots in each of the first two quarters. Calculate by hand the ending inventory, profit from sales, and inventory costs for quarters 1 and 2.
(c) Make a rough sketch of a spreadsheet model, with blocks laid out for the data cells, changing cells, output cells, and objective cell.
(d) Build a spreadsheet model for quarters 1 and 2, and then thoroughly test the model.
(e) Expand the model to full scale and then solve it.